When it comes to recruiting candidates for specific roles, businesses have a number of options available to them, ranging from in-house recruitment to work with a specialized staffing firm. While contract and contract-to-hire models are an efficient way for employers to numbers to their workforce, the argument can be made that a direct-hire is the most opportune way to fill an open position. This is especially true of specialized and higher management roles. This blog explores why direct hiring is the smartest way to hire employees in 2020.
Understanding Why Business Choose a Direct Hire Model
There can be any number of reasons and circumstances that make direct hiring a suitable means for employers to add individuals with specialized skill sets and experience to their workforce. One thing that remains constant in the recruiting world, however, is that most businesses are looking for employees that can add long-term value to the workplace.
Very few businesses go through the recruitment process to hire short-term employees, unless, of course, that is what their business model requires. The larger focus is always on candidates with a clear sense of loyalty and compatibility with a company’s culture and long-term goals. Here are a few reasons why businesses often choose direct hiring as a model to add valuable candidates to their workforce:
The Costs Associated with Hiring for an Open Position
Hiring an employee is rarely as straightforward as advertising an open position, sorting through applicants, and interviewing the best candidates to hire. You have to remember that human resources, like any other business resource, are a valuable investment for a company to make. The right employee can mean a boost in productivity, morale, integrity, and capability.
A bad hire, however, can be extremely costly in terms of wasted resources, lost revenue, damaged business credibility, and even friction in the workplace. Let’s not forget that; the hiring process itself has considerable costs associated with it, which can include:
- The expenses associated with an in-house hiring function.
- Spending on career events like career fairs and recruitment drives.
- Costs associated with advertising an open position on job boards and platforms.
- Expenses incurred on background checks and verifying claims made on a resume.
- Onboarding, training, and orienting new hires.
- The salaries, benefits, and perks offered to a new member of the workforce.
A bad hire incurs all of the above costs while offering little to no long-term value to the firm. This is one significant reason why businesses prefer to work with direct hiring firms.
The Costs and Risks of Employee Turnover
Of course, the costs associated with a new hire don’t end with the initial onboarding and training. Employee turnover is an ever-present concern for most business managers, and it can have a huge impact on a business in terms of continuity, operational smoothness, and of course, monetary losses. Certain studies approximate the cost of replacing an outgoing employee as at least half of that employee’s yearly salary. But in real terms, this cost can go far beyond that. Employee turnover can cost businesses in terms of:
- The costs associated with recruiting a replacement.
- Additional costs of onboarding, training, and managing a new hire.
- The productivity lost as the new hire adjusts to your workplace culture and processes.
- The damage to the morale and productivity of other employees who witness the turnover.
- Increased errors and mistakes as newer hires will take longer to execute tasks.
- Reputational damage as a result of a high employee turnover rate.
Hiring for Long-Term Employee Retention
Just as a high turnover rate is a worst-case scenario for your hiring efforts, a high employee retention rate is one of the goals your hiring managers should aspire to. We have already discussed how employee turnover has several monetary and non-monetary costs associated with it.
Making efforts to retain your valuable workers helps reduce the risk of employee turnover and the costs associated with it. Direct hire jobs usually attract better candidates that are looking for a permanent position to develop and demonstrate their skills. As opposed to a contract or contract-to-hire recruitment, direct hiring offers a more stable and permanent position, which is desirable for a large majority of candidates in the 2020 job market.
What Is Direct Hire? A Brief Explanation
Up until this point, we have taken a look at why so many businesses find direct hire the most suitable hiring option in most circumstances. But what exactly is it? What separates it from other types of hiring? Direct hiring, in its simplest simple form, is hiring for a full-time, permanent position. Once you recruit an employee using direct hiring, the employee becomes a full-time and permanent member of your workforce.
Direct hire employees are entitled to the same benefits, time off, and salary packages as the rest of your permanent employees. Businesses can choose to contact candidates directly or work with a staffing agency to recruit a full-time direct hire. Businesses also choose direct hiring based on the nature of the position they are recruiting for. Direct hire jobs often include:
- A permanent position in the workforce, entitled to full benefits and salaries.
- Specialized positions, like an IT direct-hire, requiring postgraduate degrees or doctorates.
- Positions requiring specialized STEM (science, technology, engineering, and mathematics) knowledge.
- C-Level and other higher management or leadership roles with a very low margin for error.
Businesses that are looking for temporary, freelance, or contract-to-hire candidates as a short-term addition to their payroll should avoid using direct hiring as a way to recruit them.
Understanding the Direct Hire Process
The direct hiring process is very similar to other forms of hiring, with one key difference. When recruiting contractual, temporary, or contract-to-hire employees, the selected candidate does not immediately become a permanent addition to the company’s payroll. The tenure of the employee-employer relationship in a contract usually does not exceed one year, unless the contract is renewed.
A temp position is by definition a temporary position that usually does not result in a more permanent role, and may not even see a renewal of their temporary employment. Contract-to-hire employees usually have a specific period to work for your business as a contractual employee, during which time their performance is assessed and evaluated for a more permanent position on your payroll.
In-House Hiring Process
Direct hiring is different in that the person is recruited for a permanent position from the get-go. Firms can choose to either work with a professional staffing firm for direct hiring or can do it in-house with recruiters on their payroll. When hiring in-house, recruiters will have to handle everything from placing a job advertisement, to sorting applications, screening and tracking candidates, conducting interviews, and selecting a candidate that best fits the role. Once hired, the candidate is part of your workforce, entitled to all the benefits, compensation, and time off as the rest of your permanent workers.
Third-Party-Managed Hiring Process
Direct hiring through a recruiting firm is almost identical, except that instead of your recruiter handling the entire hiring process, the firm does it for you. The firm manages every stem from sourcing to shortlisting and sometimes even interviewing candidates. Of course, in the usual course of things, contract, contract-to-hire, or temporary employees remain on the firm’s payroll instead of yours, but using their direct hiring services means the selected employees land directly on your payroll once hired.
The Difference between In-House Direct Hire and an Agency
As companies grow and scale up their operations and functions, there comes a point when it becomes necessary to have someone dedicated to managing the hiring and recruitment function. At that time, it becomes a choice between maintaining an in-house hiring function or creating a strategic hiring partnership with a staffing agency.
There are several trade-offs between both options that you need to be aware of before making a decision. An in-house hiring function carries distinct advantages, as well as several inherent weaknesses, no matter what your industry or niche. In many cases, businesses find it more feasible to outsource their specialized hiring and staffing function to agencies and capitalize on the time and money saved.
In-house direct talent acquisition implies that your corporate recruiter is in direct contact with candidates at every stage of the hiring process. When you choose to work with a firm for specialized recruiting, like your IT staffing, for example, the agency manages the hiring process, usually up to the point of shortlisting candidates for your approval. While the agency does manage most aspects of sourcing and prepping candidates for the role, the selected candidate is ultimately on your payroll as a full-time employee, not the agency’s.
When to Partner with a Direct Hire Staffing Agency
There are several reasons to source your direct hire through a staffing agency. Businesses are always working at a frantic pace in order to stay ahead of the competition. As such, many smaller businesses find sourcing, screening, and interviewing candidates for a potential hire a time-consuming and cost-intensive process. When you need a position filled, and you need it filled quickly, an agency is the best way to go about it.
Professional recruiters usually have deep knowledge of what is required in specialized roles. They also have access to a much larger and diverse pool of talent than most in-house recruiters. This makes them the ideal partner for strategic, long-term hiring, especially for technical and hard-to-fill roles.
Unless you’re very particular about hiring employees that fit a certain persona, a staffing firm can usually deliver any type of candidate you need. With a large talent pipeline to draw on, staffing firms are proficient at delivering candidates as quickly as possible. When you consider the costs associated with the hiring process as well as the expenses associated with maintaining full-time in-house recruiters on your payroll, a staffing firm is usually the most cost-efficient option for sourcing candidates for a role as quickly as possible.
The Benefits of Direct Hire Staffing for Employers
Why should you choose to work with a staffing partner instead of making your direct hires yourself? The short answer is that there are several distinct functions to having a third-party managing your recruitment process. Some of the most important ones follow below:
Save Recruitment Costs
The biggest, and often the most common reason to work with a staffing firm is that it helps you save considerably on time and money in terms of in-house recruitment costs. For small and medium-sized businesses, this means you can divert valuable resources to functions that directly generate revenue or support its generation.
Drive Down Employee Turnover
Professional recruiters often have their commissions and benefits tied in with successful placements, which means they are usually more motivated to find suitable candidates that add long-term value to their clients. Since the employees that they source usually have long-term career aspirations themselves, they tend to make a suitable permanent addition to your workforce, driving down the employee turnover rates you get with unsuccessful hiring.
Reduced Fallout With Lower Employee Turnover
Reduced employee turnover brings its own benefits to a firm. For one thing, it greatly reduces the risk of incurring the costs that come with employee turnover. That doesn’t just include the costs of replacing an outgoing employee. It also includes the damage to your employer brand, your credibility and reputation in the job market, your operational efficiency and transfer of company knowledge, and of course, the continuity of business functions.
Working with specialized staffing firms, such as telecom staffing agencies, usually means the agency has an in-depth understanding of the role as well as a talent pipeline to find a suitable candidate with long-term aspirations matching your business goals, reducing the risk of employee turnover.
Access to a Larger Talent Pool
Finally, one of the most important advantages of working with a staffing firm to meet your direct hiring needs is that professional recruiting firms like CGT Staffing have deep talent pools of specialized talent to fill any number of technical and hard-to-fill roles.
Access to a broader talent pool increases your chances of locating talent that fits well with your company’s long-term objectives and needs from a specific role. It also means you have access to a more diverse selection of candidates, who bring their own experiences, ideas, and solutions to the workplace. This puts your business on a much stronger footing than firms with homogenized talent.